Liam Fox was finally able to announce the start of a set of trade negotiations yesterday, but they were of a kind he had probably hoped to avoid. The issue is this: as the UK leaves the EU, it must go through a process of certifying its own schedule of goods and services at the World Trade Organization. This schedule is essentially a set of rights and obligations the UK must follow regarding other WTO members. The UK has been part of the EU’s schedule, but now, following Brexit, must set its own independent one.
The UK had hoped this would be an uncontroversial technical exercise, and for the most part it has been. This is because the UK intends to replicate as far as possible the EU’s schedule of commitments and concessions, including on tariffs. Where this has become problematic, as expected and even seemingly anticipated by the UK, is on splitting the EU’s current share of tariff rate quotas (TRQs).
TRQs essentially set the amount of imports that can enter a country at an agreed low duty rate. Beyond that volume limit, higher tariffs then apply. Unsurprisingly, they are most controversial when it comes to agricultural goods, where the upper limits of many countries’ tariff rates are high. Extracting the UK share from the EU’s current set of TRQs is a delicate exercise. While the EU would be only too happy to offload some of its quotas, other countries want to make sure they are still getting the same market access to Europe for their produce, as well as access to the newly independent UK.
The UK and EU together agreed an approach to split their TRQs in a way that still added up to the present quotas for the EU28 as a whole. But a number of countries have protested, both to the UK’s draft proposal and to the EU’s. While Russia’s objection has occupied the headlines, many of Britain’s closest allies have raised concerns as well. Among these are the US, Australia, Canada and New Zealand. The reality is that when it comes to agriculture, special relationships mean little in practice. Everyone’s out for their own as far as meat and dairy go, and trade negotiations sink or swim on these issues.
The UK will get its first real taste of this battle as it moves to open the 90-day comment period – the beginning of the negotiating process – for these talks, under article 28 of the General Agreement on Tariffs and Trade. This means the negotiations could go right up until the UK’s official Brexit date.
But while leaving the EU with the UK’s new schedules “uncertified” – that is, without agreement from all other members – is undesirable, it would not be calamitous.
A country can trade on uncertified schedules, as the EU itself knows from recent history. With successive rounds of enlargement, it has had to modify its own goods schedules at the WTO to reflect the integration of member states. This has even led to Brussels having to compensate other WTO members for changes to their market access. The process has been a protracted one, so slow that only last year the EU circulated revised goods schedules for all 28 members, meaning it has been operating with uncertified commitments long out of date. Not that you would know it from a day-to-day trading perspective.
So as negotiations go, the UK’s schedules snafu is probably something of a storm in a teacup. The government’s negotiations to accede in its own right to the global procurement agreement is more pressing, and reported US moves to challenge Britain’s application could prove thorny.
But they all pale into significance when set against the scale of Brexit negotiations. If nothing else, British negotiators are getting a crash course in trade talks. The learning curve is steep, but at least we will emerge less naive about the challenge of turning global Britain’s trade policy into a reality.
• Allie Renison is head of Europe and Trade at the Institute of Directors
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